A mortgage that qualifies for an appraisal waiver, meaning when a loan can be approved without a full home appraisal report it is called a property inspection waiver (PIW) mortgage.
The two government-sponsored enterprises, Fannie Mae and Freddie Mac allow lenders to use existing data and run through an automated underwriting system to originate the mortgage without seeking a real estate appraiser’s feedback.
If the borrower is buying a home or refinancing a mortgage, there are some government mortgage refinance programs that don’t require appraisals, property inspection waivers are applicable only on conventional mortgages.
With a property inspection waiver, the loan process will speed up and also save the borrower the cost for a full home appraisal report which typically costs around $300 or $400.
The type of appraisal waiver the borrower gets depends on whether the borrower is applying for a loan backed by Fannie Mae or Freddie Mac.
Fannie Mae property inspection waiver mortgage option is available on loans approved through the Desktop Underwriting (DU) automated underwriting system.
The automated collateral evaluation (ACE) appraisal waiver of Freddie Mac is offered through the Loan Product Advisor automated underwriting system.
When qualifying for an appraisal waiver the loan-to-value (LTV) ratio is the most important factor it is a measure of how much of the home’s value is the borrower borrowing.
For getting qualified for PIW, a borrower will either need to make a large down payment of at least 20% on a home purchase or they should have at least 10% equity in their home on a limited cash-out refinance.
A borrower needs even more equity for an appraisal waiver if they want to get more money than what they currently owe with a cash-out refinance.
The type of property can be One-unit properties or condominiums
Up to 80% of the home’s value for a primary residence and second homes
Limited cash-out refinances for:-
Up to 90% LTV for principal residences and second home
Up to 70% LTV for investment properties
Cash-out refinances for:-
Up to 70% of the value for primary residences and
Up to 60% of the value for second homes and investment properties
To understand a property inspection waiver one must first know what is a home appraisal? this appraisal determines how much is the home worth.
This appraisal is conducted by a licensed real estate appraiser who provides an unbiased assessment of the home’s value.
An inspection is done by the appraiser of the home’s interior and exterior condition, taking into account its design and features to determine its value compared to recent home sales in the area.
During the home buying process, an appraisal is conducted and lenders review them to ensure that the purchase price is correct and they calculate how much of the home’s value can be borrowed.
The borrower may also need an appraisal for a mortgage to refinance so the lender can confirm that the value is high enough to replace their current mortgage with a new one.
A PIW mortgage is available for properties in high-needs rural locations, which are identified by the Federal Housing Finance Agency (FHFA).
These properties must be a principal residence with an LTV ratio of up to 97%. If they meet lending requirements then some borrowers with lower income can qualify for a PIW mortgage up to a 105% combined LTV ratio.
Even if one is eligible for an appraisal waiver, they can still request for a full appraisal if they feel like getting an appraisal.
If a borrower has any concerns about the value of the home they are buying, an appraisal report from a licensed real estate appraiser may be worth the extra expense to prevent them from overpaying for the home.
It is advisable to always get a home inspection for an in-depth look at the home’s condition.
Many professionals in the mortgage business don’t know what an appraisal waiver or a property inspection waiver is.
If you are a borrower looking for a conventional loan on refinancing or a purchase, you might not need to get an appraisal done for your home.
In this post, we will learn what an appraisal waiver or a property inspection waiver is, with more related details.
An appraisal waiver or a property inspection waiver is an offer to waive the home appraisal for eligible transactions.
Appraisal waiver offers are issued to Desktop Underwriter (DU) using Fannie Mae’s database of more than 35 million appraisal reports in combination with proprietary analytics from Collateral Underwriter (CU) to determine the minimum level of property valuation required for loans delivered to Fannie Mae.
An appraisal is done for documenting to the lender what the property is worth. When the lender runs the numbers of your loan through the DU, and if it fits in the guidelines, your loan would be qualified for a property inspection waiver.
The lender would inform you stating there is no requirement of the appraisal for your loan hence saving you the time and money for the same.
There are tons of data that gets considered when you are buying or refinancing a house. Since the lender uses an automated system, all your data like your credit score, your down payment, data about neighborhood sales, etc.
All are plugged into DU that is going to tell the lender whether or not the appraisal is needed. However, there is never any way to know for sure whether or not you will get an appraisal waiver.
When you get an appraisal waiver or a property inspection waiver, the first benefit that you get is to save money. An appraisal may cost you anywhere from $400 to $500 depending on the lender and the loan program.
With the appraisal waiver, you do not have to pay this amount. An appraisal can take anywhere between 7 to 12 days for the lender to get the final report.
It takes time to get the appraisal report because the lender has to first schedule the appraisal.
Post which the appraiser will get the inspection done. And finally, provide the report to the lender. When your loan is entitled to a property inspection waiver, you skip through all the steps hence closing the loan earlier than expected.
Unfortunately not every borrower or loan would qualify for an appraisal waiver.
It is all in the system; Fannie Mae and Freddie Mac have set an algorithm in their automated evaluation system based on some complex data, and based on the data input, your loan may or may not qualify for the property inspection waiver.
However, if you have excellent credit and you are willing to make a down payment of 20 % or more, you have the best shot of getting an appraisal waiver on your loan.
Your credit score and your down payment come under controllable factors.
Other factors like the property type, the number of units in the property, and the price of the property are uncontrollable factors when it comes to property inspection waivers.
In the case of refinancing, your loan to value ratio could also play a role in determining whether or not your loan qualifies for an appraisal waiver.
The appraisal waiver or the property inspection waiver is a terrific option. It is a way to save off turn time on closing and also save up to $500 if your loan qualifies.
This also alleviates a lot of stress and complications with appraisals and loan processing.
So if you are looking to buy a new home or planning to refinance your current mortgage, make sure you ask your loan officer if he or she has pre-checked your loan for a property inspection waiver.